KRA, Chinese firm lock horns over Sh800m tax row
A Chinese firm Housemart Company Ltd is on the spot as the Kenya Revenue Authority seeks to recover more than Sh800 million in unremitted taxes.
The taxman has further cited the firm, which imports building and construction material and household items, for evading tax, through under-declaring more than Sh3.2 billion in sales.
This translates to Sh517 million in value-added tax (VAT) arrears. KRA sued Housemart Managing Director Ye Wei on four counts of tax evasion using proxy companies for almost three years, citing offenses dating back to 2015.
“On diverse dates between January 1, 2016, and June 30, 2017… being the managing director of Housemart Company Ltd…willfully defaulted in paying Sh583.3 million being income tax payable to the Commissioner of Domestic Taxes in contravention of the said act,” read the charges in part.
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Another charge in the legal dispute filed in October accuses Wei of dodging to pay Sh239 million in income tax payments between 2015 and 2015.
“Between 20th January 2016 and 20th December 2017…being the managing director of Housemart Company Ltd…deliberately defaulted an obligation to declare sales amounting to Sh3.2 billion to the commissioner of taxes as required by the Value Added Tax No 35 of 2013.”
Housemart is reportedly seeking to settle the matter out of court, with the case expected to head to KRA’s tax tribunal in coming weeks.
The issue has cast the spotlight on the company, one of the largest Chinese firms operating in the country.
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Last week, Housemart was appointed to the board of the Kenya Chinese Economic and Trade Association, the lobby that brings together firms with significant investments in Kenya such as Huawei and China Wu Yi.
This comes at a time when KRA is hard-pressed to meet revenue collection targets as Treasury struggles to bridge widening budget deficits occasioned by rising public debt.
Despite a raft of new taxes introduced early this year to raise more revenue, the taxman missed collection targets by Sh68 billion for the first quarter of the 2018/2019 financial year.
The shortfalls were reported in other income tax and on VAT on imports.
Over the past year, the KRA has sued firms and individuals for tax evasion.
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Some of the ongoing high profile cases are a suit against two hides and skins traders accused of evading Sh204 million in taxes and two business people for Sh7 billion in VAT and income tax.